2016 (8) TMI 1530 - AT - Income Tax

Disallowance u/s 14A - HELD THAT - As before us the stand of the assessee is that so far as assessment year 2004-05 is concerned it is squarely covered by the decision from Hon ble Bombay High Court in CIT vs. India Advantage Securities Ltd. 2012 (11) TMI 458 - ITAT, MUMBAI . Since, the assessee received dividend on shares and mutual fund units acquired and held as stock in trade and since the assessee itself disallowed a sum suo moto as expenditure attributable to the earning income. The issue is squarely covered by the decision from Hon'ble jurisdictional High Court in CIT vs India Advantage Securities Ltd.(supra), therefore, the disallowance u/s 14A r.w.r 8D is not required to be made and therefore, cannot be sustained in view of the foregoing decision. Accordingly, the order of the Ld. Commissioner of Income Tax (Appeal) is set-aside and Ld. Assessing Officer is directed to delete the addition made u/s 14A r.w.r 8D of the rules. Appeals of the assessee are allowed.

Summary

Issues Involved:
- Disallowance under section 14A of the Income Tax Act for Assessment years 2004-05 and 2009-10.

Analysis:
For the Assessment year 2004-05, the assessee, a trader in shares and securities, declared income of &8377; 13,21,99,027/-, with the assessment determining total income at &8377; 13,43,14,687/- after disallowance of &8377; 20,64,825/- under section 14A. The CIT(A) directed re-computation of the disallowance under section 14A r.w. Rule 8D of the I.T. Rules. The Tribunal ordered the matter back to the Assessing Officer to recompute the disallowance in light of a decision from the Hon'ble Bombay High Court. The Assessing Officer restored the disallowance to &8377; 20,64,825/-. The assessee argued that the disallowance was not required based on the decision from the Hon'ble Bombay High Court in a specific case, leading to the deletion of the addition under section 14A.

For the Assessment year 2009-10, the disallowance under section 14A was restricted to &8377; 8,77,82,357/- against the claim of &8377; 25,57,552/- by the assessee. The assessee contended that the disallowance was not warranted based on the same decision from the Hon'ble Bombay High Court, resulting in the allowance of the appeals.

In both cases, the Tribunal considered the arguments, material available, and decisions cited by both parties. The Tribunal found the issue to be identical in both appeals and decided to adjudicate through a common order for brevity. The Tribunal ultimately allowed the appeals of the assessee based on the application of the decision from the Hon'ble Bombay High Court, directing the deletion of the additions made under section 14A in both Assessment years.

The order was pronounced in the open court in the presence of representatives from both sides at the conclusion of the hearing on 18/07/2016.